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Top 5 Debt Funds for Stable Returns and Risk Management in 2023

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Created on
August 19, 2022


What’s Inside

What are Debt Funds?

Debt funds are mutual funds that invest in fixed income securities, such as bonds, treasury bills, commercial papers, and government securities. These securities pay a fixed interest regularly and return the principal amount at maturity. Debt mutual funds aim to provide investors with regular income, capital preservation, and liquidity.

Benefits of Debt Funds

Debt funds suit investors with a low risk appetite and a short to medium-term investment horizon. Debt funds offer several benefits over other fixed income options, such as:

  • Suitable for low-risk investors with short to medium-term goals.
  • Higher returns than savings accounts, fixed deposits, and post office schemes.
  • Tax-efficient due to indexation benefits, taxed at 20% after 3 years.
  • Diversification across securities reduces portfolio risk.
  • Managed by experienced professionals for optimised returns and risk management

Top 5 Debt Funds to Invest in 2023

There are many best debt mutual funds available in India that offer stable returns and risk management. However, the best debt funds for you may depend on your investment objectives, risk appetite, time horizon, and tax implications.

Here is a list of some of the top debt mutual funds in India based on their performance, ratings, and features -

Fund Name

Investment Type


Risk Level

Investment Objective

Nippon India Gilt Securities Fund

Government securities

Not specified


Optimal returns with minimal credit and interest rate risks

SBI Magnum Medium Duration Fund

Debt and money market

3-4 years


Regular income and capital appreciation with moderate risk

ICICI Prudential Corporate Bond Fund

High-quality corporate bonds

Not specified


Steady income and liquidity with low to moderate risk

Kotak Credit Risk Fund

Corporate bonds

Not specified


Income and capital gains by taking advantage of credit risks

ICICI Prudential Ultra Short-Term Fund

Debt and money market

Up to 1 year


Liquidity and reasonable returns with low risk

Note: These are some of the top debt mutual funds you can consider investing in 2023. However, you should also research and analyse before making any investment decision.


Investors should choose debt funds based on their risk tolerance, investment duration, and financial objectives. Important factors to consider include performance, expense ratio, portfolio mix, and the fund manager's track record. While debt mutual funds offer benefits such as stability, risk management, superior returns, tax advantages, diversification, and expert oversight, investors must also be cautious of risks and select funds that match their preferences and requirements.

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Frequently Asked Questions

1. What are debt funds, and how are they different from equity funds?

Debt funds invest in fixed-income securities like bonds and provide regular interest income. They differ from equity funds in the type of assets they invest in and the risk-return profile.

2. How do debt funds generate returns while focusing on risk management?

Debt funds generate returns from interest on bonds while prioritising risk management through diversification and credit assessment.

3. What criteria were used to select this list's top 5 debt funds?

The top 5 debt funds in this list are selected based on performance, risk management, expense ratios, asset quality, and fund manager expertise.

4. Are debt funds suitable for all types of investors?

Debt funds suit a range of investors, especially those seeking lower risk and steady income. They're not suitable for high-risk, high-reward profiles.

5. What should investors consider before investing in these top-rated debt funds?

Investors should consider their risk tolerance, investment goals, fund's track record, expenses, and fund manager's expertise before investing in top-rated debt funds.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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